Bloomberg News

Energy Future’s Oncor Utility Valuation Lowered by CreditSights

March 05, 2013

The value of Energy Future Holdings Corp.’s regulated unit has fallen by $400 million because of a drop in utility valuations, CreditSights Inc. said in a research note.

Energy Future’s stake in Oncor Electric Delivery is worth $7.3 billion, compared with $7.7 billion a year ago, Andy DeVries, a New York-based analyst at CreditSights, wrote today in a note. While Oncor posted a 9 percent increase in earnings before interest, taxes, depreciation and amortization for 2012 compared with a year ago, its total value declined because of a 5 percent decrease in the valuation of utility industry peers, DeVries said.

Energy Future, the largest power producer in Texas formerly known as TXU, faces a material restructuring within 12 months as it struggles to make debt (TXU:US) payments amid a collapse in natural gas prices that set electricity rates, Moody’s Investors Service said in a Feb. 26 note. Energy Future’s private-equity owners, led by KKR & Co. (KKR:US) and TPG Capital, have sought to protect Oncor from a potential restructuring by paying off intercompany loans while changing the terms of outstanding bonds to isolate the regulated distribution unit.

Allan Koenig, a spokesman for Dallas-based Energy Future, declined to comment on the report.

“Oncor represents the only hope of recovering a dollar of the sponsor’s failed $8 billion investment in TXU”, DeVries said in the note.

Private-equity owners led by KKR and TPG invested $8.3 billion in the $48 billion buyout of Energy Future in 2007, the largest in history. KKR has retained Blackstone Group LP (BX:US) as an adviser to help restructure Energy Future’s $37.8 billion in long-term debt, people familiar with the situation said last month.

Oncor owns power lines in and around Dallas, Fort Worth and Midland, Texas and delivers electricity to more than 3 million homes and businesses. Energy Future owns an 80 percent stake in the utility.

To contact the reporter on this story: Mark Chediak in San Francisco at mchediak@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net


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